The last couple of years have demonstrated just how unpredictable Wall Street can be over short timelines. We've witnessed all three indexes march to record-closing highs, plunge into respective bear markets, and now enter bull markets, at least according to one definition.
But if there's one consistency on Wall Street, it's that the major indexes always move higher over long periods. Every stock market correction or bear market throughout history has proved to be a buying opportunity for patient investors. In other words, it means investors with cash have an opportunity to take advantage of discounts in game-changing stocks stemming from the 2022 bear market.
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Best of all, most online brokerages have made it easier than ever to invest your money on Wall Street. Minimum deposit requirements and commission fees have been all but eliminated, which allows for everyday investors to put any amount of money to work -- even $500.
If you have $500 that's ready to invest, and you're certain you won't need this money to cover emergencies or pay bills, the following three stocks stand out as no-brainer buys right now.
Alphabet
The first surefire stock to buy with $500 right now is none other than FAANG stock Alphabet (GOOGL 10.22%) (GOOG 9.96%), the parent of internet search engine Google and ultra-popular streaming platform YouTube.
Being an ad-driven business acts as both a blessing and a curse for Alphabet, depending on your investing timeline. With multiple probability indicators and economic datapoints pointing to a high likelihood of a U.S recession, it's not a surprise to see advertisers paring back their spending. That's not particularly good news for Google or YouTube in the short run.
But there are two sides to this coin. Specifically, U.S. economic expansions last substantially longer than downturns. Even though recessions are perfectly normal, a company like Alphabet is going to disproportionately benefit from multiyear expansions. If you're a patient investor, the cash-flow potential of Alphabet, whose internet search engine (Google) accounts for nearly 93% of worldwide internet search share, is unsurpassed.
However, it's the company's ancillary operations that are really turning heads. For instance, YouTube is the second most-visited social media site in the world. According to the company, daily views of Shorts -- short-form videos that are usually less than 60 seconds -- have surged to more than 50 billion in the first quarter (Q1) of 2023. That's up from 30 billion in the comparable year-ago period and roughly 6.5 billion daily views in Q1 2021. This is a clear-cut ad growth opportunity for YouTube and parent Alphabet.
Likewise, Google Cloud delivered its second consecutive quarter of operating profits in the recently reported second quarter. Google Cloud is the global No. 3 cloud infrastructure service provider, per Canalys, and the margins associated with cloud services are often considerably higher than advertising.
Even following a significant bounce from its 2022 bear market lows, Alphabet is still historically cheap relative to its future cash flow potential.
U.S. Bancorp
A second no-brainer stock that's begging to be bought with $500 right now is regional bank U.S. Bancorp (USB 0.32%). You might be more familiar with its subsidiary, U.S. Bank.
Similar to Alphabet, bank stocks are cyclical and susceptible to concerns about economic weakness. With a number of indicators suggesting slower economic growth may be on the horizon, there's the real possibility loan losses and/or credit delinquencies could rise for banks.
U.S. Bancorp was also swept up in the short-lived regional banking crisis that saw SVB Financial's Silicon Valley Bank, along with Signature Bank and First Republic Bank, all get seized by regulators. Although U.S. Bancorp's deposit balance modestly declined from $505 billion at the end of March to $489 billion by the close of April, the company's recently released fiscal third quarter highlights a $33 billion increase in deposits since the end of April to $522 billion (as of June 30). In other words, the crisis of confidence that filtered through the regional banking industry didn't have legs, at least when it came to U.S. Bancorp.
To add to the above, U.S. Bancorp improved its CET1 capital ratio by 60 basis points to 9.1% in the June-ended quarter from the end of March. There had been some concern about the company's lower CET1 capital ratio following its acquisition of Union Bank from Mitsubishi UFJ Financial Group. The latest results assuaged those concerns. The cherry on top is that over a half million of the 1.2 million consumers and small businesses gained from the Union Bank deal have already signed up for a digital banking account.
If U.S. Bancorp has one well-defined competitive advantage in the banking industry, it's the company's ability to encourage its customers to bank online or via mobile app. At this time last year, more than 80% of its active customers were banking digitally, with north of 60% of all loan sales completed online or via the mobile app. Digital banking is notably cheaper than in-person interactions for banks, which has helped boost U.S. Bancorp's operating efficiency over time.
Considering that U.S. Bancorp consistently produces some of the highest return on assets among large banks, it makes for a screaming buy anytime you can nab shares near their book value. At only 31% above its book value and an estimated 9 times forward-year earnings, U.S. Bancorp looks like a bona fide bargain.
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Okta
The third no-brainer stock to confidently buy with $500 right now is cybersecurity company Okta (OKTA -0.69%).
Not to sound like a broken record, but the prospect of economic weakness has been the biggest thorn in Okta's side over the past year. During recessions, it's not uncommon for investors to be more mindful of traditional valuation metrics. With a forward price-to-earnings ratio of 58, Okta isn't cheap. But focusing solely on valuation may cause opportunistic investors to miss out on an amazing company.
To start with, cybersecurity solutions have become something of a basic necessity for businesses of all sizes. Regardless of how the U.S. economy performs, businesses with an online or cloud presence need solutions in place to protect their data and that of their customers. Translation: Okta can expect its operating cash flow to remain quite predictable in any economic environment.
What makes Okta unique is the company's cloud-native identity verification platform. Cloud identity is expected to be an $80 billion addressable market, and it all starts with its artificial intelligence (AI)-driven platform. By leaning on machine learning, Okta's solutions can grow smarter and evolve over time.
The company's key performance indicators pretty much speak for themselves. Over the past 10 quarters, the company's trailing-12-month dollar-based net retention rate has stuck like molasses between 120% and 124%. In simpler terms, it means existing clients are spending 20% to 24% more in the comparable quarter of the following year. To boot, customer retention has consistently been in the mid-90-percentile, which suggests clients are sticking with the platform.
Okta's acquisition of Auth0 also represents an opportunity for investors to pounce. Though this buyout has been met with higher-than-expected integration costs, this disappointment should be short-lived. Auth0 provides a path for Okta to expand its services internationally, which is key to sustaining its double-digit growth rate.
